Shares of Toshiba Corp jumped 4 percent on Wednesday after a newspaper report that Apple Inc would invest in its production of small smartphone-use displays, dropping Sharp from the running for that business in Japan.

Shares of Sharp tumbled as much as 2.7 percent on the Nikkan Kogyo report but regaining ground after Sharp issued a statement saying the article was inaccurate and demanding the newspaper withdraw it. Nikkan Kogyo declined to comment.

Nikkan Kogyo said Apple had been in negotiations with both Toshiba and Sharp about investing 100 billion yen ($1.2 billion) each in production lines for small LCD displays to be used in an upcoming version of its popular iPhone.

Apple decided to focus its investments in Japan in one company and chose Toshiba, the newspaper said.

The decision, which follows Japan's March 11 earthquake and tsunami, reflects Apple's desire to diversify its risk of having too much investment in one country, the newspaper said.

(Reporting by Junko Fujita; Editing by Nathan Layne)

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